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Meet The 23-Year-Old Who Had Such A Good Idea, Strangers Gave Him $13 Million To Build It

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JamesProud

Most 23-year-olds are just getting on their feet and struggling to make ends meet after graduating from college. James Proud, however, has already raised millions to fund his startup that creates a device to help people sleep better.

James Proud is the CEO of Hello Inc., which produces a device called the Sense sleep tracker. The Sense is a tiny orb designed to sit on your nightstand and monitor the conditions in your room as you sleep.

The idea is to educate you about your sleeping habits and what's waking you up in the middle of the night.  

Hello Inc.'s Kickstarter campaign for the Sense just ended on Friday, and the company blew past its $100,000 goal to raise $2.4 million. But that number represents a small fraction of the total funding Hello Inc. has raised so far. Proud and his company have raised $10.5 million from a circle of well-connected angel investors, according to The Wall Street Journal, bringing their total funding to nearly $13 million.

Some of Proud's investors include tech industry big shots such as David Marcus, the former head of PayPal, Dan Rose, a Facebook executive, and Hugo Barra, a Xiamoi executive who formerly worked as Google's head of product for Android, as the Journal reports.

Proud said his inspiration for the Sense stemmed from a basic concept: everyone needs to sleep, and most people want to learn how to sleep better.

"Most people don't walk a lot every single day," Proud told Business Insider in a previous interview. "But everyone has to sleep every single day. ... Your day is purely influenced by how you slept the previous night."

Proud's desire to create things began to show at a very young age. When he was 9 years old, Proud taught himself HTML after seeing a book called "Your Own Website" in a store, according to Forbes. By age 12, he was already building professional websites.

Proud says he always had a desire to attend college, but by the time he had graduated from high school, he had a change of heart, as Forbes reports. Instead, the South London native opted to join Peter Thiel's fellowship in 2011 — a program in which the billionaire investor pays young entrepreneurs to skip out on a traditional college education to pursue their business ideas. 

Proud's first startup, GigLocator, was the product of his time in Thiel's fellowship. GigLocator, a live music aggregation service, was bought by the owner of the Williamsburg-based Brooklyn Bowl venue almost immediately after Proud'completed Thiel's program in 2012.

After GigLocator was bought, Proud began working on Hello Inc. The Sense sleep tracker is Hello Inc.'s first product, and it will retail for $129 when it eventually launches. 

The secret to making a successful tech product, Proud says, is to create something that works so well it fits naturally into your everyday life.

"Technology is most valuable when you don't have to think about it," Proud said to Business Insider previously. "That's when it becomes magical."

SEE ALSO: A Startup Just Raised $3 Million After Inventing A Smart Cup That Tells You What's Inside It

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The Former Facebook CTO Is Building A Brilliant Office Culture That Every Startup Should Follow

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Bret Taylor, QuipBuilding a startup from the ground up is extremely difficult. 

As rewarding as it is, startups are usually very demanding and take huge amounts of attention, which often lead to long working hours.

That’s why it’s really hard for startup employees to find the right work-life balance. 

Fortunately, more and more startups are seeing this problem, and are starting to put work-life balance on the front burner.

Quip, the mobile/Web word processing software developer, is one of them.

Its founder Bret Taylor, who served as Facebook’s CTO for three years, had this in mind from the beginning, and wants to make sure his employees aren’t overwhelmed with work. When asked about it, he told us the following:

“We’re really trying to create a company that, if we have the good fortune of being successful, which is not a foregone conclusion, people won’t be burned out - which I think is a very common problem in startups.

Both my co-founder and I have kids, and we aren't working a 100 hours a week - although I’m thinking about work 100 hours a week. We’re trying to make our culture compatible with having a work-life balance. So we make a point of leaving the office at 5:30PM every day. There’s no social pressure to stay later, and we are still very productive here."

Perhaps, this explains why Quip has been able to add over 5,000 new clients, including Facebook and Instagram, in just a year since its launch. It was also featured in Apple’s WWDC keynote last June.

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Curiosity Is The Key To Being A Successful Venture Capitalist

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BlakeBartlett

Becoming an excellent venture capitalist isn't just about reading the right books or getting an MBA.

In fact, the most important quality that could make or break an investor's career has little to do with work experience at all, according to Blake Bartlett, vice president OpenView Venture Partners.

In his latest blog post, Bartlett emphasizes the importance of what he calls "intellectual curiosity."

Examining companies and potential investment opportunities with a healthy dose of skepticism helps VCs look beyond the short term and into the bigger picture.

Bartlett uses Blue Bottle, the craft coffee retailer that raised $25 million from Morgan Stanley Investment Management and other big-name investors in January, as an example.

If someone claims that coffee companies like Blue Bottle are going to kill Starbucks, an "intellectually curious" person wouldn't just take that at face value. He or she would ask questions like "Why is Starbucks so broken?" and "When and where did this coffee trend start?" and "Who are the leading players today?" as Bartlett points out.

Asking questions and maintaining a strong sense of curiosity is also necessary to see a company or market trend for what it truly is. For example, Bartlett notes that competitors may bash their rivals and executives could try to inflate the achievements of their company's department. It's the VC's job to cut through any exaggerations and investigate which claims are valid.

Before becoming vice president at OpenView Venture Partners, Bartlett was the vice president at Battery Ventures, where his investments included Glassdoor and Wayfair among others. 

Be sure to check out Blake Bartlett's blog post for more detail about what it means to be an "intellectually curious" VC. 

SEE ALSO: 5 Excellent Tips Every Startup Should Follow To Lure Investors

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7 Ways Successful Entrepreneurs Think Differently From Everyone Else

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richard branson

Building a company from the ground up requires a tremendous amount of confidence, creativity, motivation, and focus. It's the reason why not everyone can make it as an entrepreneur.

We took a look at the Quora thread "What are some of the habits entrepreneurs have that other people don't?" and highlighted some of the best answers from those who have firsthand experience.

Here are some of the ways they see the world differently from the average person:

1. They see money as a way to make more money.

When most people come into money, whether it's by winning the lottery or receiving a bonus, their first impulse is to spend it on something frivolous like a new car. When entrepreneurs receive an influx of money, they find a smart way to invest it in a business opportunity that can yield an even higher return. This self-restraint becomes a habit.

"Well after they've made a fortune, most self-made wealthy people remain comparatively frugal; their lifestyles may be lavish, but they're almost always spending much less than they earn," says Oliver Emberton, founder of British software company Silktide.

2. They have an ability to become intensely focused.

"Time and our attention are the only truly finite constraints — incalculably precious and easily squandered. Successful entrepreneurs are absurdly conscious of the fact, and tend to become highly organized, intolerant of inefficiency and laser focused,"Emberton says.

That intense focus is often given as the reason why there are plenty of anecdotes about legendary entrepreneurs like Steve Jobs and Elon Musk occasionally being difficult to work with.

3. They manage to be positive realists.

"To make smart gambles — and that's what becoming rich entails — you need an honest appreciation of odds that few possess," Emberton says. Successful entrepreneurs tend not to be too pessimistic or too optimistic.

They're able to understand that for a large number of reasons their venture can collapse entirely and can adequately prepare, but they also have enough idealism to take big risks in the first place.

4. They see obstacles as opportunities.

Average people see difficulty as a chance to give up, says San Francisco-based entrepreneur Andrei Kolodovski, but entrepreneurs see unexpected challenges as a way to make their companies even stronger.

Thomas Edison perfectly illustrated this when he used the accidental destruction of his production plant in 1914 as a way to rebuild his business in a streamlined way and get his team to work harder and more efficiently. Within a year, his company had not only recovered, but was bringing in more revenue than ever before.

5. They focus on opportunity cost.

Entrepreneurs make every decision by comparing options and seeing which one will yield the most value.

"Whatever they do, they make sure the value created is larger than the cost of resources used,"Kolodovski says. "Regular people tend to focus on expenses. Remember those driving around parking lots for 30 minutes just to save five minutes of walking?"

6. They think of ideas beyond their capabilities.

True entrepreneurs are always thinking about growth opportunities, Kolodovski says.

Rather than acting practically and working within their comfort zones, they push themselves into situations that will require them to stretch their skills and force them to recruit more talent to turn their aspirations into reality.

7. They have vision.

Entrepreneurs are driven by the idea that they have the solution to a certain problem, and that they need to lead the charge to implement it. And they do it without fear of being mocked or rejected for trying things differently.

"Entrepreneurs see something that needs to get done... a product that must be offered... a problem that must be solved... and they feel so deeply about these that they can face the opposition when starting a business," says Finnish entrepreneur Gerard Danford.

SEE ALSO: 10 Strategies That Will Help You Triumph Over Adversity

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Top Silicon Valley Investor Bill Gurley Is All About These Startup Trends Right Now

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Bill GurleyTop Silicon Valley investor Bill Gurley is all about the recent startup trend of personalization and customization.

In an interview with Forbes contributor Eric Jackson, Gurley spoke about his experiences as an investor and his observations on the startup space.

"I am fascinated with the art of personalization in the context of online businesses," Gurley said. "Delivering custom built experiences for each and every customer has huge impact on conversion ratios and long-term NPS. And it is very hard to do at scale."

Gurley pointed to Sailthru as one startup that is really pushing this idea forward. Sailthru is NYC-based software-as-a-service (SAAS) company that lets brands deliver personalized search results. According to Gurley, they have more than 400 customers and "super high ROI."

Gurley's also excited about another startup he invested in call Stitch Fix. The San Francisco women's fashion retailer "uses data science to create personalized product recommendations for its customers (optimizing both style and fit)," he said.

With a successful record of investing — Gurley and his firm Benchmark Capital has invested in OpenTable, Yelp, GrubHub, Twitter, Zillow, and Uber — Gurley seems to really get the industry. He recognizes a good business model when he sees it.

Now he's eyeing the hyper-personalized and individualized trend. And he's betting his money it's the next big thing in the startup space.

SEE ALSO: Startups Need To Ask Themselves, 'Am I A College Or Professional Athlete?'

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Quora Turned Into Something Its Cofounders Didn't Expect

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adam d'angelo

Since it was founded in 2009, Quora, the questions and answers platform, has provided us with a really great Wikipedia-meets-Google resource for our random and varied queries.

It touches on everything from bizarre interview stories to how Steve Jobs would sell a pen.

Five years after its creation, Quora has made a name for itself, but interestingly, one of its founders did not necessarily anticipate that happening.

In light of Quora rolling out its first iPad app, Kurt Wagner at Re/code interviewed Adam D’Angelo, cofounder of Quora, to check in on the site and see how it's doing. D'Angelo shared some thoughts on the new app and plans for monetization (he's thinking of rolling out ads sometime next year), but what was most interesting to us was how Quora evolved from its founder's initial plans.

"When we first started, we thought that Quora was going to be a place where people come when they have a question and where they come when they want to write answers," D'Angelo told Re/code. "It turned out that the most popular thing among the users was not asking questions or writing answers, but just reading answers that were already there."

Quora visitors tend to come to the site to browse the content that is already there as opposed to posing new questions or answers. Sort of like Wikipedia visitors.

"Wikipedia is kind of extreme, where a very, very small group of people contribute pretty much everything," D'Angelo said. "Most people [on Quora] are not contributing. It’s a minority of people who contribute, but it’s more than people expect."

SEE ALSO: How Quora Made Its Email Newsletters Irresistible To Read

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Zady Cofounders Darabi And Bédat Aim To Disrupt The Fashion Industry One Product At A Time

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photo 3 (1).JPG

Soraya Darabi, 30, and Maxine Bédat, 32, celebrated their startup's first anniversary this week, but the two are not sitting back and relaxing just yet.

The slow-fashion startup, called Zady, is rolling out its first private label, one product at a time — beginning with a knit wool sweater.

Darabi and Bédat started Zady because they were frustrated by the fashion industry at large and wanted to do something to change the way clothing was manufactured, sold, and bought. This idea of slow fashion — timeless clothing that is produced ethically and sustainably — really spoke to the two women.

"Slow fashion to us is reverting back to an era where things were done better," Darabi told Business Insider. "In our office we joke, 'Slow food, or as our grandparents used to call it, food.' The same joke can be made with apparel.

"America was once known for its manufacturing and its emphasis on craftsmanship and ability to make things well. The majority of the fashion industry has moved its production overseas. It's about slowing down and thinking about process."

Zady, or the "Whole Foods of fashion" as they like to think of themselves, focuses on both the materials of the clothing as well as the process by which it was made. They're looking to make the industry more transparent, helping consumers better understand where their clothing is coming from.

Neither Darabi nor Bédat come from a fashion background, but they both bring various skills to the table. Darabi has already succesfully founded another startup called Foodspotting, which she sold to OpenTable for $10 million. And Bédat has a background in in international law and development, having most recently started a nonprofit called The Bootstrap Project, which helps artisans from impoverished areas preserve their craft traditions.

Over the year, Zady has partnered with brands and designers who promote the same values of sustainability and slow-fashion, but now Zady has decided to get in on the production side too. 

The first product Zady will sell, the knit wool sweater, is made of all-natural materials, including wool from the Imperial Stock Ranch in Shaniko, Oregon, a farm that uses a conservation management plan to make sure that it has a positive impact on the environment. The wool will be treated, dyed, and manufactured all in the U.S., which has the highest standards for ethics and sustainability.

"The idea for us in producing our own line was to take our learnings from the brands we’ve curated over the past year and focus on what we think the brand of the future will look like," Darabi said.

The brands that are featured on Zady all share information about the process of how their clothing was made, but with their own line, Zady will be able to really divulge all of the details they want about how the clothing.

While Zady has had a successful first year, its founders are aware of the challenges, tackling such a large industry.

"Retailers are producing things in really horrific ways," Darabi said. "Our challenge as a small startup was to overcome the goliath that is the current state of the fashion industry."

Soraya and Maxine  approved for press

The cofounders' interest in slow fashion and sustainability dates all the way back to their years together in high school, when they first started thinking about where products come from and how laborers were treated. Darabi even started a club called the Human Rights Advocates, where she asked fellow students to tear out the labels on their clothing to show solidarity with laborers.

"We were excited when H&M first opened, and I think we both had wonderful discussions about that buying lifestyle — especially with small New York apartments, we had closets overflowing with stuff that was falling apart and we always felt like we had nothing to wear,"Bédat told Business Insider. "As we got started on the project and learning how things were made we started sending articles back and forth about the problems in the supply chain, about people being mistreated that are making the final product to environmental issues, there are so many problems with the current system of production that it was shocking that we didn’t know these things before."

Now the two are thrilled to be able to make an impact with Zady.

"It's inspiring to be part of this community," Bédat said. "We’re going to be able to see when we turn to this new way, this slow fashion way, we'll be able to feel great about our clothing, feel better about the environment, and dress better."

SEE ALSO: Foodspotting's Co-Founder Has A New Fashion Startup

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Why Uber's Master Plan To Steal Lyft's Drivers Might Be Perfectly Legal

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lyft uber war ad

On Tuesday, The Verge reported that Uber is sending "hired brand ambassadors" undercover to recruit drivers from its biggest rivals in the ridesharing space, especially Lyft.

A "hired brand ambassador" seems to be a trumped-up way of saying "contracted employees." So, in other words, Uber is reportedly telling contracted employees to take rides with Lyft, and during those rides, the Uber employees are trying to poach Lyft drivers for Uber.

Uber's CEO Travis Kalanick confirmed that documents used in The Verge's report were real, tweeting the following:

UberTweet

Uber's campaign, called Operation Slog, is an aggressive business maneuver. But is it illegal? Probably not, according to a law professor we spoke with.

Since Uber's contractors are paying Lyft drivers for their service, it would be difficult to prove this poaching technique significantly damages Lyft, according to Mark R. Patterson, a professor of law at Fordham University. 

"They're not misrepresenting what they're doing," Patterson told us. "They [Uber contractors] are hiring them [Lyft drivers] for a trip, and even if it's a shorter trip he [the Lyft driver] still agrees to accept it. Otherwise, it's not clear that there's a misrepresentation or harm to the driver."

Under federal antitrust law, it's illegal to engage in conduct that serves no other purpose than to exclude competition. Indeed, Uber's practices could could hurt Lyft's "business with their legitimate customers," according to Patterson.

Earlier this month, CNNMoney reported Uber had allegedly instructed 177 of its employees to order Lyft rides and then cancel them before the car arrived. CNNMoney's report was partially based on Lyft's claims that Uber employees have ordered and cancelled more than 5,000 rides since last October.

If this is true, this would significantly cut into Lyft's business, since fewer Lyft drivers would be available to pick up legitimate customers. Moreover, Lyft drivers would be consuming resources like fuel without receiving payment.

After CNNMoney published that report, Uber said these claims were "baseless and simply untrue," adding that Lyft employees had carried out a similar strategy by calling and then canceling nearly 13,000 Uber rides.

In a blog post explaining Operation Slog, Uber also writes: "We never use marketing tactics that prevent a driver from making their living — and that includes never intentionally canceling rides."

At the same time, however, another Uber competitor claims Uber employees have intentionally ordered and cancelled rides. GetTaxi, a ridesharing service available in New York, London, Moscow, and Tel Aviv among other cities, told Business Insider that Uber employees had called and cancelled rides from the company during a two-week period in January and February of this year. 

The truth behind the situation is unclear, but this alleged "canceling" practice, according to Patterson, could be considered exclusionary conduct without a legitimate cause.

Antitrust lawyer David Balto shared a similar take on the situation in an interview with National Journal, saying the practice of trying to poach Lyft's drivers during a trip probably wouldn't merit an investigation from the Federal Trade Commission. But some of Uber's other alleged tactics, such as ordering and cancelling rides from a competitor, could raise antitrust concerns, Balto said.

However, the alleged cancellation practice still wouldn't be considered illegal from an antitrust standpoint unless Uber (or Lyft, for that matter) has a large enough share in the market to be considered a monopoly, Patterson told us.

This would depend on how the market is defined — i.e. whether Uber is considered to be competing with other on-demand app-based car services such as Lyft, GetTaxi, and Sidecar, or whether standard yellow taxis are included.

"If taxis are included, then Uber probably wouldn't have a large share," Patterson said.

Therefore, Uber's tactics would not be illegal.

The question, according to Patterson, isn't whether or not Uber's tactics are hurting Lyft.

"It might be," he said. "But it's whether [Uber] is injuring [Lyft] enough for them to bring it up in a legal way." 

SEE ALSO: Here's How To Use Uber — The Incredibly Easy App That Could Change Your Life

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If This Company Succeeds, We Won't Be Fighting About Reclining Airline Seats

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AirGo SeatsAnother week, another flight diverted because passengers were fighting over a reclining seat.

It's the great airborne travel question of our age: To recline, or not to recline?

Of course, the core of the problem is the coach airline seat itself. While there's been, it seems, near constant innovation for first- and business-class seats, the stalwart coach seat has suffered with the same design since the 1960s, according to AirGo Design, a Singapore-based startup that wants to reinvent the genre.

"AirGo is the only aircraft seat in the world which is designed based on actual 3D scanning data of human body and therefore, is ergonomically superior," the company's co-founder and Chief Technology Officer, Alireza Yaghoubi, recently told BizDaily in a Q&A. (The company was founded in 2013).

As you can see from this screenshot of AirGo's Orion seating system, reclining isn't an issue: The seat behind and the seat in front are designed to prevent one passenger's actions from interfering with another passenger's space.

An passenger who doesn't recline...

AirGo-Recline-2

...gives up no room or comfort when a passenger in front does recline.

AirGo-Recline-Screenshot

Plus, the entertainment screen pulls down from above, so a repositioned front seat doesn't affect your viewing experience in the same way it does with seatback screens.

Viewscreens have a much greater range of motion.

AirGo-Screens-Screenshot

Christopher Elliott of USA Today interviewed Yaghoubi earlier this year for a story about seating issues and the airlines. Elliott noted Yaghoubi's view that "technology exists to offer everyone on the plane ample legroom and space to move in coach class. But it would require a significant investment, and...airlines prefer to sink that money into first-class passengers, who are deemed more valuable."

Consequently, the first-class seat becomes progressively more sophisticated, while the coach seat — at least of late — encourages passenger conflict, inspires controversial anti-reclining gadgets, and is probably starting to annoy pilots as they worry about diverted landings to hand over combative economy travelers to the authorities.


NOW WATCH: How To Land A Plane If The Pilot Has A Heart Attack

 

SEE ALSO: Here's The $22 Gadget That Started A Huge Fight, Causing A United Airlines Flight To Get Diverted

SEE ALSO: Another Passenger Fight Over Reclining Seats Has Caused A Flight To Be Diverted

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How 3 Startup CEOs Gave Up Fortunes To Turn Half Their Employees Into Millionaires

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Scott Britton SinglePlatform

There’s a startup in New York everyone talks about, and the things they say aren't very nice.

The startup sold for ~$80 million and the founders got rich. But, as the rumors go, no other employee made more than $50,000.

That's a common exit scenario. The founders put in a lot of risk in the beginning, and they alone get wealthy if their company is a success.

But we found a few seasoned founders have begun to set a different precedent. Their goal — in addition to creating strong products and strong financial outcomes for themselves — was to create great outcomes for the people they worked with, even if their options hadn't fully vested. As a result, these CEOs turned one-third to one-half of their employees into millionaires when their startups sold for hundreds of millions of dollars.

Scott Belsky, cofounder of Behance, calls this generous mentality being "long-term greedy."

"In an acquisition scenario, there are a few weeks when you're thinking about the money you could make and it brings out the worst in people because they're near-term greedy," he says. "Anyone who wants to stay in an industry for a long time will learn that loyalty and success of individuals on your team is the most important thing."

Here's how three founders rewarded employees when their companies sold for hundreds of millions.

How MoPub Turned 36 Out of 100 Employees Into Millionaires During Its $350 Million Sale To Twitter

jim payne mopubJim Payne has been part of more than one startup's exit. He was an employee at a dot-com startup that went bust, and another that got acquired. Most recently, he was the founder of MoPub, an ad tech company that was acquired by Twitter in September 2013 for $350 million. 

Having been a startup employee before, Payne knows how it feels to work hard for an outcome that benefits only a few people.

"Exits are few and far between, even though it seems like they happen all the time in the press," Payne tells us. "It was important to me that people who took a chance on MoPub would not only have a great outcome but that they would also have one that was significantly impactful to them and their future opportunities." 

Payne set his employees up for success by getting them stock early, offering performance-based stock-option grants regularly, being a good negotiator, and picking ethical investors.

"The best thing you can do to help your employees make a lot of money in an outcome is to take care of them early," says Payne.

MoPub offered employees loans so they could exercise their stock options — long before an acquisition deal was on the table — to save money on taxes. The company-issued loans allowed employees to buy options at low prices and begin capital gains treatment without taking big personal, financial risks.

MoPub offered employees loans so they could exercise their stock options long before an acquisition deal was on the table.

Other startups, including Olga Vidisheva's Shoptiques, have begun to implement this process. All but one MoPub employee who was offered a loan exercised the stock options.

Also, every six months to a year, Payne's team would also reevaluate employees' stock based on performance and issue new options accordingly. This helped employees feel their work was always valued, and gave ownership to new employees who were rock stars.

"The last thing you want is have someone who joined late and is shaping up to be a rock star feel like they didn't get an outcome," says Payne.

rich wong accel partnersInvestors also determine the financial fate of a startup's employees because most ways to reward them during an acquisition come out of their pockets. Payne credits Rich Wong of Accel Partners as a huge supporter of MoPub's employees and culture.

"He'd come into the office and say, 'You guys have brilliant people here,'" Payne says of Wong. "Employees are looking to join something that's bigger than them, and management should be out for everyone's best interest, not just their own."

Picking the right acquirer is also key if you want to financially repay employees.

Payne turned down three acquisition offers before Twitter came along. Turning down previous offers gave Payne the courage to negotiate more on behalf of his team when the right offer presented itself.

"The first time [I walked away from a deal] I was panicked," Payne says. "Someone is putting you all-in in poker, and whatever you consider to be your fortune is on the line. You get involved in the deal process and you start to think about the exit. It's human nature. People get attached to the idea and it's very hard to walk away."

Payne declined one very serious offer because he felt it was too early to sell MoPub, even though it would have meant financial security for him and his family. But he says that experience allowed him to look at future deals with logic, rather than emotion. And that strategy worked when Twitter came knocking. Payne was able to ask for things, such as restricted stock units for employees and the ability to keep his team on the East Coast, during the acquisition.

The result: A $350 million buyout that made 36 of Mo Pub's 100 employees millionaires, with 10 people who now have "significant" wealth.

"People need to remember that employees are putting their career eggs in your basket, and it's incumbent on you to take care of them when you can. CEOs have more leverage than they think to take care of people," says Payne. 

"You can hoard the whole pie for yourself, but it's a team sport you're playing. If you're doing [a startup] for ego-gratification, I don't think you're going to be a great CEO. I think you can make money along the way by being mercenary, but you'll never truly be great."

How A Sole Founder Turned Half His Team Into Millionaires In A $100 Million Exit (Even Though None Had Vested Stock Options)SinglePlatform

Wiley Cerilli dropped in and out of college five times and never graduated. His first Manhattan apartment was modest with a blow-up mattress for a bed that frequently popped when he'd lie on it. 

Now he's 34 and a multimillionaire. In 2012, he sold his two-year-old company, SinglePlatform, for $100 million in cash and stock to a publicly traded company, Constant Contact. Half of his employees became millionaires, even though none of their stock options had a chance to fully vest.

Here's how Cerilli rewarded employees, even though he wasn't contractually obligated to do so.

In June 2012, Wiley Cerilli wasn't expecting to sell SinglePlatform. He was in the middle of raising a large $17 million Series B investment from investors when Constant Contact swooped in and asked to take Cerilli to lunch. Within 48 hours, Constant Contact made Cerilli an offer to acquire SinglePlatform.

While Cerilli was floored by the offer, he knew it wasn't a good time to get acquired.singleplatform A few weeks before the offer, SinglePlatform only had 13 full-time employees; four of them had been at the company for more than one year, which means most stock options that had been granted hadn't vested. By the time SinglePlatform got acquired, its team doubled in size to about 30 people; none of the new employees had stock options.

"You have the majority of the company, including multiple members of executive team like our COO and CTO, who had been there less than a year," Cerilli explains. "We had this amazing offer, but an acquisition then would mean they’d make $0."

We had this amazing offer, but an acquisition would mean employees would make $0.

Cerilli, who had been part of a startup that exited (food-delivery site Seamless), went over options with his investors. First Round Capital's Howard Morgan suggested a way to reward employees that would come at his and Cerilli's expenses.

"We went down the list of employees and vested people an additional year to 100% on top of whatever they were at, depending on how long they'd been at the company," Cerilli says. 

For the brand-new employees, Cerilli gave them thousands of dollars in cash bonuses and restricted stock units from Constant Contact. In the end, these adjustments turned more than half the team into millionaires. Cerilli also made sure every employee's job was guaranteed after the sale, and that everyone's job would remain in New York City. As Cerilli phrased it in a company-wide email, the deal was a "win-win-win."

When asked why he went to lengths to help his employees, Cerilli replied: "I wanted to celebrate with the people who I was going to war with at SinglePlatform, and they should be rewarded."

How A (Mostly Bootstrapped) Startup Turned A Dozen Employees Into Millionaires During A $150 Million Exit
scott belsky, matias corea, behance, july 2012, bi, dng

Scott Belsky's startup Behance and Adobe had been familiar with each other for years. But Belsky, who bootstrapped Behance for five years with cofounder Matias Corea, wasn't interested in selling his company. 

"We were not interested in being acquired," Belsky tells Business Insider. "We were close to raising a Series B round of financing. Adobe had been a very logical partner of ours for many years, and we had been having conversations about collaboration. But each time we did partnerships, the deal integration was always more than either side was willing to do. I think that's a very healthy drive toward an acquisition when you're thinking of all the things you can do together."

When Adobe approached Belsky with a buyout offer in December 2012, he and Corea gave it a lot of thought. It was a lot of money — roughly $150 million — but would it be good for Behance's users and staff?

"It seemed like an acquisition would make sense from a customer-experience perspective. That's the first step [in analyzing an acquisition deal]," says Belsky. Belsky and Corea also wanted to make sure that Adobe would respect and help cultivate the work culture and brand Behance had built. Behance holds a creative conference every year, for example, and it was important to Belsky that they continue to run it under Adobe's leadership.

Next, Belsky considered what an acquisition would mean for his team from a financial and career perspective. Could he provide the same bright outlook as an independent company that Adobe could offer if the two companies merged?

"CEOs have to think about net-net — what does this mean for everyone," Belsky says. "You have to account for dilution [in a future round], market risk and team fatigue. If your team has been together for five or more years with no liquidity, will they be able to progress their lifestyles if you don't sell?"

Once Belsky and his cofounder agreed to move forward with the acquisition, they had to figure out how to take care of employees. Belsky was a first-time founder who had previously worked for Goldman Sachs; he wasn't sure what he was legally allowed to do during the sale, so he turned to Behance angel investor and entrepreneur Chris Dixon for advice. 

"Chris was up at midnight with me during the acquisition," Belsky says. "I'd ask him, 'Can we do this? Is this possible?' He was someone I could bounce ideas off of."

Belsky and Corea ended up making a spreadsheet that listed every Behance employee's name and had two columns: what employees were expecting from a sale based on vested stock options, and what the founders felt they deserved to make. With permission from Adobe and Behance's board, Belsky set aside money from the acquisition to distribute to employees in the form of cash and RSUs.

Chris Dixon"You have to put yourself in the shoes of every single person on your team, from the person who's been there second longest to the person who joined six months ago," says Belsky. "You don't have to limit yourself to what the cap chart is. You can say, 'Let's give a larger reward to this person vested over the coming years to send a message that all they have to do is continue helping the company moving forward.'"

Belsky's plan to recognize, reward, and incentivize the best employees seems to have worked: Two years later, not a single Behance employee has resigned from Adobe. And a dozen people on the team experienced a "very material life change" after the sale.

"You have to stand up for your employees during an acquisition and say what's right," Belsky says. "No one is looking out for these people besides [the CEO] and years from now I wanted to be able to say that we really did right by our team, our community, and our brand."

While Belsky did a ton of work to turn Behance into a $150 million company, he knows he couldn't have done it without a star team.

"You have to ground yourself with the realization that you did not make this [exit] happen," he says. "You got the team together and maybe initially you took the most risk, but you did not make this happen."

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What It Feels Like To Walk Away From An Offer That Guarantees A Lifetime Fortune For You And Your Family

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jim payne mopub twitter

A few founders have been offered tons of money to sell their startups — then walked away from the deals.

Evan Spiegel famously turned down Facebook's multibillion-dollar offer to buy Snapchat. Groupon turned down a $6 billion offer from Google

Sometimes, it works out. Snapchat, for example, is still growing and is reportedly raising a new round of financing at a ~$10 billion valuation.

Sometimes, it doesn't.

Video app Viddy walked away from a $100 million offer, then lost all of its traction. Yahoo and Facebook both offered to buy Foursquare for $100 million to $120 million when it had raised only $5 million. Google offered to buy TechCrunch Disrupt winner Qwiki for more than $100 million. Qwiki's hype died down, and it ended up selling for half that price to Yahoo. 

"Of course it's a tough decision because you're trying to figure out what's the best thing to do for your company," Foursquare's Dennis Crowley said of acquisition offers. "Your company is your baby at that point … You have to make a call and weigh the pros and cons."

adam bain

One startup CEO who was faced with that tough decision is Jim Payne, who walked away from three acquisition offers before he agreed to sell his ad tech company MoPub to Twitter. Fortunately for Payne, it worked out: Twitter paid $350 million to buy his 100-person company, and 36 of his employees became millionaires.

But he says walking away from one particularly serious offer was the hardest decision he has ever had to make.

"The first time [I walked away from a deal], I was panicked," Payne says. "Someone is putting you all-in in poker, and whatever you consider to be your fortune is on the line. You get involved in the deal process and you start to think about the exit. It's human nature. People get attached to the idea and it's very hard to walk away."

Payne declined one very serious offer because he felt it was too early to sell MoPub, even though it would have meant financial security for him and his family.  

But he says that experience allowed him to look at future deals with logic, rather than emotion. And that strategy worked when Twitter came knocking. Payne was able to ask for things, like restricted stock units for employees and the ability to keep his team on the East Coast, during the acquisition.

The end result: A $350 million buyout that made one-third of MoPub's employees millionaires, with 10 people who now have "significant" wealth.

SEE ALSO: How 3 CEOs Gave Up Fortunes To Turn Half Their Employees Into Millionaires

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How A Founder Turned Half His Team Into Millionaires During A $100 Million Sale (Even Though Their Stock Hadn't Vested)

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singleplatform

This is an excerpt from a story that was previously published on Business Insider, How 3 CEOs Gave Up Fortunes To Turn Half Their Employees Into Millionaires.

 

Wiley Cerilli dropped in and out of college five times and never graduated. His first Manhattan apartment was modest with a blow-up mattress for a bed that frequently popped when he'd lie on it. 

Now, he's 34 and a multimillionaire. In 2012, he sold his 2-year-old company, SinglePlatform, for $100 million in cash and stock to a publicly traded company, Constant Contact. Half of his employees became millionaires, even though none of their stock options had a chance to fully vest.

Here's how Cerilli rewarded employees, even though he wasn't contractually obligated to do so.

In June 2012, Wiley Cerilli wasn't expecting to sell SinglePlatform. He was in the middle of raising a large $17 million Series B investment from investors when Constant Contact swooped in and asked to take Cerilli to lunch. Within 48 hours, Constant Contact made Cerilli an offer to acquire SinglePlatform.

While Cerilli was floored by the offer, he knew it wasn't a good time to get acquired. A few weeks before the offer, SinglePlatform only had 13 full-time employees; four of them had been at the company for more than one year, which means most stock options that had been granted hadn't vested. By the time SinglePlatform got acquired, its team doubled in size to about 30 people; none of the new employees had stock options.

"You have the majority of the company, including multiple members of executive team like our COO and CTO, who had been there less than a year," Cerilli explains. "We had this amazing offer, but an acquisition then would mean they’d make $0."

We had this amazing offer, but an acquisition would mean employees would make $0.

Cerilli, who had been part of a startup that exited (food-delivery site Seamless), went over options with his investors. First Round Capital's Howard Morgan suggested a way to reward employees that would come at his and Cerilli's expenses.

"We went down the list of employees and vested people an additional year to 100% on top of whatever they were at, depending on how long they'd been at the company," Cerilli says. 

For the brand-new employees, Cerilli gave them thousands of dollars in cash bonuses and restricted stock units from Constant Contact. In the end, these adjustments turned more than half the team into millionaires. Cerilli also made sure every employee's job was guaranteed after the sale and that everyone's job would remain in New York City. As Cerilli phrased it in a company-wide email, the deal was a "win-win-win."

When asked why he went to lengths to help his employees, Cerilli replied: "I wanted to celebrate with the people who I was going to war with at SinglePlatform, and they should be rewarded."

Now read about two other CEOs who did something similar for their employees.

SEE ALSO: What It Feels Like To Wake Up At 32 With Everything You've Ever Wanted

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See Why Gowanus — Home To A Toxic Canal — Is NYC's Hot New Destination For Startups

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gowanus tour

Gowanus, the southwestern Brooklyn neighborhood named for the toxic canal that snakes its way through it, doesn't sound like a hot destination. But this neighborhood is thriving — small businesses, artists, and tech startups are moving into the area in droves, taking advantage of the neighborhood's relatively low office rents and fundamentally changing its character.

Genius, a website that annotates music lyrics, literature, and news, made headlines in July when it announced the team would be moving to an extensively renovated warehouse building in Gowanus.

Could this industrial neighborhood, currently undergoing a Superfund cleanup, be the next frontier for New York City tech companies? We headed to Brooklyn to find out.

Gowanus is located in southwest Brooklyn, bordered by Carroll Gardens to the west, Boerum Hill to the north, and Park Slope to the east.



As you walk through the neighborhood's more residential areas, you'll find wide, leafy streets and classic Brooklyn brownstones. Though the streets of Gowanus may seem relatively pleasant now, it hasn't always been that way. Gowanus has long been overshadowed by the affluent neighborhoods that surround it, at times becoming a hotbed for mob violence and crime.

Source: Village Voice



That's due, in part, to the polluted waterway that snakes its way through the neighborhood. Built in 1869, the Gowanus Canal was once a major transportation route connecting the Upper New York Bay and the interior of Brooklyn. For decades, the 1.8-mile channel served as a landing point for mills, tanneries, chemical plants, and other heavy industries. But local legend holds that the canal also served another, darker purpose as a dumping ground for unlucky mobsters.

Source: EPA



See the rest of the story at Business Insider

This Coffee Startup Wants To Use Data To Find You The Perfect Cup Of Joe

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craft coffee

The tech world is known for having a bit of a coffee addiction.

Square CEO Jack Dorsey, for example, is a longtime investor in San Francisco-based roasters Sightglass Coffee. And, of course, there's Blue Bottle Coffee, which in January raised $25.7 million in funding from such big names as Instagram CEO Kevin Systrom, Twitter cofounder Evan Williams, and Silicon Valley investors Chris Sacca and Joanne Wilson. 

But not everyone knows how to navigate the complicated world of artisanal coffee.

That's where Craft Coffee comes in. By analyzing each subscriber's taste and price preferences, the coffee subscription service moves users away from big coffee brand names and towards independent American roasters, including Sightglass. Subscribers receive three different roasts each month on Craft Coffee's plan, which can be adjusted to fit each household's needs. 

"Coffee is so personal and subjective, but it's a lot like wine in that people are intimidated," Craft Coffee founder Mike Horn said to Business Insider. "They might not understand the label, or the jargon or flavors might sound too fancy. People want a lot of guidance when they're picking their coffee, and they want a convenient experience."

The company, which is currently based in Brooklyn, spent 10 weeks in Silicon Valley this summer, building their product in a San Jose rental house as a part of Y Combinator's Summer 2014 class. Craft Coffee is the only coffee company to be backed by Y Combinator in the accelerator's nine-year history.

craft coffee

"We're taking an old industry, using tech and algorithms to understand taste — but taste is so subjective," Horn said. "We went to Y Combinator and said, 'We have a real tech problem with a real tech solution,' and YC agreed."

Their solution is what they call the Coffee DNA Project. After analyzing thousands of coffees — all from independent roasters — they were able to identify certain traits and flavor profiles that were consistent among them. 

When someone signs up for a subscription with Craft Coffee, all they're asked is what coffee they currently drink. The service's recommendation algorithm then tries to find a coffee from an independent roaster that has a similar taste quality and price point.

As users rate more and more coffees over their months with Craft Coffee, the service will be better able to understand each person's preferences. 

"The solution is personal. It collects information from you and knows you better over time," Horn said. "It could potentially say something like, 'Hey, you really like Ethiopian coffees, and you didn’t even know.'"

The product has resonated with startups, who can sign up to have bags of coffee delivered to their offices each month. Uber's New York offices, Shout, and Lua are among those who have signed up so far. Reddit cofounder Alexis Ohanian is also an avid supporter.

craft coffee

But Horn is even more excited about how well Craft Coffee is catching on with the general public, who can customize how often they want beans delivered based on how much coffee they drink a month. 

He says that more than 130 million Americans spend $4 billion a year on coffee they make at home, hardly any of which is sold online. That's not even including Keurig and other single-cup brewers. 

"Every single day we have sales to people who live in maybe a dozen different states, where the customer tells us they typically drink Starbucks or other grocery store coffees," Horn said. "Every time we have a sale like that, we know we're onto something." 

SEE ALSO: Here's The Difference Between Coffee Drinkers In New York City And San Francisco

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How Quitting My Corporate Job For My Startup Dream Completely Ruined My Life

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man working computer travel laptop businessman

Finally the SMS arrived:

“Tomorrow morning 5am, flight number AZ610 from Rome to NewYork.”

An SMS hitting my BlackBerry on Sunday evenings used to decide my destination and client for the coming week.

I was working for one of the top three global strategy consulting firms.

A life packed in a suitcase. A consulting life where you miss out on everything and everyone in life, except Excel spreadsheets. A fancy business life we are taught to be ideal slaves of, at top business schools whose degrees we are proud to hold.

After few hours of sleep, the private driver was taking me to the Rome Fuimicino airport so I could take my fancy business-class flight to NYC. Upon arrival, I was checking in to a fancy five-star hotel and heading to my client’s office afterwards.

The salary? It was fancy, too. The company was proud to be among the top payers of the industry.

Parents

There was something wrong with this consulting life, though. I couldn’t stand this fancy bullsh*t any longer and one day I called my parents:

“Dad, mom, I just quit my job. I want to start my own startup.”

My mom almost had a heart attack. It wasn’t the first thing a perfectionist mother wanted to hear after encouraging me to graduate from the world’s top business schools with top grades.

I tried to ease her distress. No chance.

“Mom, I hate it. All these consultants are pretending to be happy and they are taking happiness pills. I get to sleep only 3–4 hours a day. All those benefits the company promised don’t exist. Remember the fancy five-star hotel? I am working almost 20 hours a day and I don’t even enjoy it. Fancy breakfast? We never have time to have that. Fancy lunch, dinner? It’s just a sandwich in front of our Excel spreadsheets.

Oh, by the way, instead of enjoying a champagne, I stare at spreadsheets during my entire business class flights, too. The fancy salary? I never have time to spend a single penny of it.

I hate my life, Mom, it’s such a loser life. I don’t even see my girlfriend. I can’t fake it anymore. I want to start my own business.”

My parents had retired after years of a 9–5 working routine at their secure and boring government jobs.

I knew that coming from a family with no entrepreneurial background, it would be difficult to explain my situation to them, but I didn’t expect the call next morning.

It was my mom on the phone:

“Sooooooooo, how is your business doing?! Is it growing?!”

No matter what I said, I couldn’t explain to her that a business needs more than one day to grow.

Girlfriend, Friends & Social Circle

Having had the most supportive girlfriend ever, it was now time I shared the news with my friends who were busy climbing the fancy career steps in the fancy corporate world.

I told everyone that I just quit my job to follow my startup dream. Some of my friends gradually stopped seeing me, probably because they thought there was something wrong with me since it was the second “fancy” job I had quit in a short period of time.

While the rest of my friends were supportive, there was, however, still something wrong with my relationship with them:

I soon realized I was starting to pull myself away from social gatherings.

Every time I met with those friends, I didn’t have many updates to give them in response to their repeated questions, such as, “So, how is your startup going? You are going to be the next Zuckerberg, right?” “Oh man, we are so proud of you and we are so sure you will soon receive a huge round of investment.”

Doing a startup was a long journey and I was putting myself under so much pressure by giving such a f*ck about what other people think.

Day by day, I was getting lonelier and more depressive as I avoided social occasions. My startup progress was not as fast as my social circle imagined it to be and I was fed up with telling people it took years for startups like Facebook and Twitter to arrive at where they are now.

The only comfortable place was next to my few entrepreneur friends. It was true, only an entrepreneur could understand an entrepreneur.

Cash, cash, cash.

As if the social pressure and loneliness were not enough, I was meeting the mother of all stresses: running out of cash much faster than I had imagined.

This was killing my productivity and ability to make proper decisions. I was panicking and rushing to be successful and to make money.

One day, I even found myself asking my girlfriend for a few cents because I had no money to buy bottled water. I didn’t know it was just the beginning of such a difficult life full of ups and downs…

Today.

Enough with the drama: more than two years have passed since those days. I am now writing this blog post in a beautiful resort in Phuket, Thailand, while enjoying my mojito.

Wait, I am not selling a dream. No, I haven’t become a millionaire startup founder.

However, my business has a constant stream of cash that allows me to travel the world and to work from wherever there is WiFi.

There are, however, five things I wish I had asked myself before starting this painful journey. Five questions I believe every future entrepreneur should ask himself before taking the first step to entrepreneurship:

1. Are you ready for the social pressure?

If you have friends and family who are not entrepreneurs, they won’t truly understand what you are trying to achieve and the public pressure will be even higher.

I cared so much about what other people think of me– so much that it ruined my life.

I was so hard on myself and punished myself with even more work so I could announce my success as soon as possible. That is, until the day I realized no one gave a f*ck about me, so why would I?

You are no more than a few seconds of attention other people give to a Facebook status. In 2014, no one has time to care about others in such a crowded, noisy world.

If you care so much about what others think, you will waste your time trying to prove that you are successful instead of focusing on your startup.

Get a life. I got mine quite late.

2. Are you single or do you have an extremely supportive partner?

As we grow up, we share more of our life with our partners than with our friends or family. While I was lucky to have such an amazing girl, it was so sad to see many of my entrepreneur friends breaking up with their girlfriends along the way.

Doing your own business is tough – way tougher than I could have ever imagined. Your mind is constantly f*cked up with a million things going on inside and no other person, including your girlfriend, has a single clue what is going on in there.

If you are not single, make sure your partner understands it’s sometimes normal not to have a mindset even for a simple kiss. Yes, for a simple proper French kiss.

3. Do you have enough cash to last at least a year?

Good, then multiply that amount at least by three because you will be running out of your savings way faster than you ever imagined. Along the way, there will be so many hidden costs, accountant fees, lawyer needs, broken iPhones or PCs, etc.

Get ready for a smaller apartment, smaller food portions, or counting your cents, which you never cared about in your life previously.

The last few months before you totally run out of your cash will be especially difficult and the pressure will grow so exponentially that you won’t be able to sleep properly.

Success will come slowly, and cash will burn fast. Be smart – plan from day one.

4. Are you ready to sleep only few hours a day?

Having escaped from the corporate consulting world, I was thinking I was finally going to live the dream by working whenever I wanted to work – until I read Lori Greiner’s following quote:

 It all started by little wake-ups in the middle of the night. At the beginning, it was because I was too excited about my ideas and I had so many of them. I simply couldn’t wait for the morning to arrive so that I could start working again.

Then came the exaggeration phase. I was working too much because I never had enough of working for my idea and I wanted to do more. However, the more I worked and the later I went to bed, the more difficult it was to fall asleep and the lower the quality of my sleep became.

As a result, at least two or three days of every week I was having days with almost no productivity.

Don’t be fooled by my fancy Instagram picture above. Don’t be fooled by over-hyped funding news about startup founders becoming millionaires.

The stories behind the scenes have so many painful days, sleepless nights, and continuous rejections and failures.

The journey to success is long. Very long. Very often, too long.

5. How do you define success?

Each of us has a different priority list in life. For most people, money is the number one priority on the list, while work-life balance ranks higher for others. Consequently, people define success differently.

Depending on your definition of success, the difficulty of your entrepreneurial journey will differ, too. If money and public success are what matters to you the most, you are likely to have a hard time along your journey.

Remember Hemingway’s wise words:

“It is good to have an end to journey toward; but it is the journey that matters, in the end.”

Successful entrepreneurs are not necessarily those who raise millions of investment rounds. Don’t forget, they are one in a million.

There are, however, thousands of dreamers out there who manage to bootstrap their startups or live so well off on their own, but even they do not make it to the top of tech news.

No matter how much your journey f*cks up your life or how difficult it will be, enjoy the ride and keep following your passion. As Tony Gaskin puts it perfectly:

“If you don’t build your dream, someone will hire you to help build theirs.”

Ali Mese, growth hacker, startup marketer, foodie, and globetrotter, is the founder of Piqers. Follow him on Facebook and Twitter.

SEE ALSO: If Someone Handed Steve Jobs A Pen, This Is How He Would've Sold It

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Here's How First-Year MBA Students Won $50,000 In A School Startup Competition

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ross impact challenge

Most grad school orientation weeks consist of a few days packed with dry lectures about the upcoming semester, with a mixer or barbeque thrown in. But this year at the University of Michigan Ross School of Business, new MBA students were immediately tasked with creating a startup. And they were given four days to do it.

From Monday, Aug. 24, to Thursday, Aug. 28, all 450 first-year MBA students participated in the fourth annual Impact Challenge, a week-long competition to come up with the best business proposal, with a grand prize of $50,000 in funding.

Students were split into six groups of 75 and given the task of crafting a business plan for a for-profit company that would serve underprivileged youth in Detroit and inspire them to grow up to become entrepreneurs.

ross impact challengeEach group was assigned one faculty member, but in a mostly observational role. It was fascinating to watch each group find a way to organize 75 people on their own, professor of management and director of the Ross Leadership Initiative Scott DeRue tells Business Insider. "Some groups were led by a collective of five to 10 leaders. In others, one leader was dominant. And others operated on a kind of leadership rotation," he says.

Since the task was complex and the groups so large, DeRue found that the groups that operated with a fluid leadership system were the most successful. Such a system helped the group that created Mo'Tech ultimately win. Their company will sell refurbished computers to businesses at a profit and a smaller fraction to Detroit youth at affordable prices.

"It was really cool to see the specialization and focus within our group," Mo'Tech member Giancarlo Moise tells us. The first day was used for organization and brainstorming, and the members of the group that became Mo'Tech split into groups of specialization based on their professional backgrounds and natural talents.

ross impact challenge

Moise became the face of the proposed startup, along with Lily Hamburger and Lucius Clay, since they had exceptional storytelling and presentation abilities, which was crucial for effectively pitching the company at the end of the competition.

On Tuesday, the second day, the groups traveled en masse to downtown Detroit to gather information on the impoverished neighborhoods that would become their client base.

The Ross Leadership Initiative arranged groups of community leaders, youth groups, and local entrepreneurs for the Ross students to meet with.

Mo'Tech was assigned to an area centered on the Brightmoor community. Clay tells us that he met with a pastor who told him that it required a great deal of effort to improve the rundown neighborhood.

"He told us that before joining the parish, he was asked if he was really sure he wanted to take the job, since the church and the neighborhood were so rundown. There were piles of trash in front of the church, and it was surrounded by abandoned, burnt-out houses," Clay says. Detroit has suffered for years with an arson problem.

ross impact challenge

While Clay got an idea of what his company's client base looked like, Moise spent the day meeting with Detroit entrepreneurs like Quicken Loans' Dan Gilbert and representatives of the incubator TechTown Detroit.

When their group met back on the UMich campus, some common themes emerged.

"We noticed that there was a need for computer literacy," Moise says. "We learned that students were using smartphones in lieu of computers for schoolwork, and that they didn't know the capabilities of personal computers."

On Wednesday, some of those community representatives and business leaders visited the campus to help the Ross students refine their pitches, which they gave to a panel of judges on Thursday. The panel consisted of one Ross professor, two venture capitalists, and another professor who was also a VC.

Clay tells us that Mo'Tech took first place because they found a sweet spot between social outreach and the potential for profitable growth.

Mo'Tech plans to gather used computers from large companies like General Motors, wipe their memories clean, and sell them to local businesses at affordable prices. Clay says that for every fourth or fifth computer sold, one would be sold at a price of around $25 to $50 to youth groups, schools, or individuals. The low price was not for profit generation but to give their clients a sense of ownership that would compel them to take care of the machine.

ross school impact challengeClay adds that Mo'Tech was also prepared to answer the panel's questions when they tried to point out potential flaws in the plan. For example, they were asked how they would pay for software, which would generally be more expensive than the used hardware. Mo'Tech, however, would install Linux operating systems on their computers so that their clients could use free Linux software that mimicked a Windows interface.

De Rue says he was especially impressed by the way Mo'Tech incorporated its social initiative into a for-profit company, and that even though each of the other five competitors could still become viable companies, they were less focused on finding ways to scale and become profitable.

After prevailing in the "Shark Tank"-like judging process, Mo'Tech was awarded the first-place prize of $50,000 from GM to turn Mo'Tech into a reality. UMich business undergrads wrapped up the Impact Challenge on Friday by competing to make the best Kickstarter campaign, which has yet to go live, to help get Mo'Tech off the ground.

Ross MBA students, now fully immersed in their first semester, can say that they started their business school experience by creating a company. It was an intense but highly effective transition into b-school, DeRue says.

"I was very impressed with all six groups," he tells us. "We threw them all into the deep end, and they ended up swimming."

SEE ALSO: 3 Things I Wish I'd Known During My First Year Of Business School

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Tips Every Startup Founder Should Live By, As Told By One Of Silicon Alley's Most Successful Entrepreneurs

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Alexa Von Tobel, LearnVest

When you're starting your own business, it's hard to draw the line between when your work day ends and when your personal life begins.

For some (and probably many) startup founders, that line probably doesn't exist. Few entrepreneurs know this as well as Alexa von Tobel, the founder and CEO of LearnVest.

Von Tobel officially launched LearnVest in 2009 as an online subscription-based service aimed at making financial planning easy and accessible to women with little knowledge of the subject.

It didn't take long for LearnVest to gain recognition within Silicon Alley. By 2011 the company was already valued at $100 million, and von Tobel has been recognized as one of the most prominent female figures in the industry by Business Insider, Forbes, and Inc. among other publications.

But, as is the case with most successful startups, LearnVest's accomplishments didn't come easily. Von Tobel founded LearnVest during one of the worst economic periods in the country's history — the recession that occurred between 2007 and 2009. It took many sleepless nights and workdays that extended as late as 2 am to get Learnvest to where it is today.

In an interview with Business Insider, she shared some of the tips, guidelines, and principles that got her and the LearnVest team through some of their toughest times.

Focus and discipline are key

learnvest, bi, dng

According to von Tobel, there's an important question entrepreneurs should ask themselves to nail down specific goals and priorities:

"If our business was only going to be around for a quarter, what would we be doing?" 

Answering this question can help weed out the things that are less important to make it easier to execute necessities on a daily basis.

"When I plan my day I ask 'Am I doing the three things I need to do today? If not, why not?'" von Tobel said. "It's a process you should go through all the time." 

'Make great decisions every day'

learnvest, bi, dng

This is a motto that von Tobel lives by, and it drives the work ethic behind the LearnVest team.

"You can't make good decisions, but you don't have to make perfect decisions," von Tobel said. "Every day, come to work and make great decisions. If we're waiting for the perfect decision, we're going to be waiting for a long time. But if we only make good decisions, were never going to get there."

This fits into von Tobel's larger perspective on taking everything one day at a time. Having a long term plan is important, but it's also crucial to make sure you're doing your best work on a daily basis to move the business' goals forward. Looking toward the future all the time can become too overwhelming, she said.

Think big, then shrink it down

According to von Tobel, it's better to start out with big ambitious ideas even if you can't execute them the way you initially envisioned. If you think big, you can scale back your idea to something more manageable and realistic.

"It means you're thinking about all the opportunity that could be ahead of you," she said. "As an entrepreneur, you should ask 'How big could this be? What could ths look like? If you only think small, you could be missing opportunities that are ahead of you."

Don't forget to take care of yourself, too

learnvest, bi, dng

In the early days of LearnVest, von Tobel put everything involving her business before her own health and needs. A lifestyle that's based on little sleep, long workdays of drinking nothing but coffee, and forgetting to squeeze in doctors visits obviously isn't sustainable for the long term. Now that von Tobel has been running a business for four years, she says she goes to the gym almost everyday and stays healthy. 

Those lifestyle choices play a big role in how von Tobel runs her business.

"I'm healthier, I'm happier, I sleep better. And all of that is important," she said. "When my life is better, my company is better."

Although von Tobel's advice may be helpful, words can only go so far when it comes to describing the immense amount of work it takes to start your own company.

"If you know what it takes to become an entrepreneur, you'd never become one," she said. "Because it's you, in the trenches every day... It's a very hard, lonely endeavor to dream about something that's not even built yet and then go out and build it against the odds."

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One Of The Smartest VCs Of All Time Has An Ominous Warning For The Tech Industry

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Bill Gurley

Respected venture capitalist Bill Gurley is sounding the alarm on the startup industry.

In an interview with The Wall Street Journal, Gurley says the current environment reminds him of the tech bubble that formed in the late 1990s.

Every incremental day that goes past I have this feeling a little bit more. I think that Silicon Valley as a whole or that the venture-capital community or startup community is taking on an excessive amount of risk right now. Unprecedented since ‘'99. In some ways less silly than '99 and in other ways more silly than in '99.

Gurley adds, "No one's fearful, everyone's greedy, and it will eventually end."

Gurley is a partner at Benchmark. He's invested in Uber, OpenTable, and Zillow. Benchmark has invested in Snapchat, Quip, Yelp, and many more.

Private companies are raising giant sums of money — some as much as $500 million, says Gurley. When you have that much money, you have to spend it, so companies are upping their "burn rate," or the amount of money they're willing to lose to grow their businesses.

Gurley thinks the burn rate for companies is the highest it's been since 1999. He also thinks that the number of people working at money-losing companies is the highest it's been since 1999. People think nothing of working at companies that are losing millions of dollars a year because there's an overwhelming feeling of optimism right now.

If a downturn suddenly hits the startup world, Gurley thinks it's going to take "massive" amounts of "gymnastics" for companies to readjust their businesses to cut down on the burn rate.

This is all being driven by the low cost of capital. It's relatively easy for startups to raise money right now.

All the money sloshing around in the startup world is leading to secondary problems. Landlords in San Francisco are trying to lock in startups to 10-year leases. Gurley thinks this is a sign that landlords believe their rents are at a record high, and they want to lock in the rate. If landlords thought the price was going to be higher, they wouldn't be asking for 10-year leases. 

Gurley isn't cutting back on his investment, though. He's trying to be selective. He also says he's trying to advise his companies to be smart with their money.

But there's a problem with that. You can't afford to be conservative when all this money is flying around:

That's really difficult because if you have a competitor that's going to double or triple down on sales and you just decide, "Oh, well I'm not going to execute bad business decisions, I'm just going to sit back," you lose market share. So, choosing not to play the game on the field doesn't work, so you're left with trying to advise someone to be pragmatically aggressive with some type of conservative backdrop or alternative strategy in case the world shifts. But it's hard.

For what it's worth, this isn't the first time an investor has sounded the alarm. Four years ago, venture investor Fred Wilson warned of storm clouds. Other people were concerned that we were in Bubble 2.0 then, too.

But things have been pretty good since then. 

And earlier this year, when Box tried to IPO, but couldn't make it to the public markets, some people wondered if the bubble was finally bursting. But it managed to raise money on the private markets. And then there's Square, which seemed to be struggling, but has managed to raise another $100 million. 

A downturn is coming at some point, and companies should be prepared. But, figuring out timing of these things is nearly impossible.

Read his full interview at The Wall Street Journal >


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New York's No. 1 VC Has An Ominous Warning For The Tech Industry

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fred wilson

Another venture capitalist is warning that startups are burning too much money. 

Fred Wilson of Union Square Ventures says burn rates are "sky high all over the US startup sector right now." The burn rate is the amount of money the company is losing. 

Wilson was following the comments of Bill Gurley, a partner at venture firm Benchmark, who said, "I think that Silicon Valley as a whole or that the venture-capital community or startup community is taking on an excessive amount of risk right now."

Gurley believes startups are burning more cash today than at any other point since 1999. He thinks too many people are working at companies that are losing millions of dollars.

For now, startups are having relatively little trouble raising new money, so they just keep burning through cash. They know there is more coming in the next round. But at some point the money is going to dry up. We're going to hit a wall, and then the companies will have to figure out how to take down their burn rate, or they will go out of business. 

Gurley and Wilson are two of the smartest, most successful, and most vocal investors in tech companies out there. Wilson has invested in Twitter, Zynga, Tumblr, and many others. Gurley invested in OpenTable, Zillow, and Uber, to name a few. 

Wilson says, "We have multiple portfolio companies burning multiple millions of dollars a month. Thankfully its not our entire portfolio. But it is more than I’d like and more than I’m personally comfortable with."

He also says, "I’ve been grumpy for months, possibly for longer than that, about this ... At some point you have to build a real business, generate real profits, sustain the company without the largess of investor’s capital, and start producing value the old fashioned way. We have a number of companies in our portfolio that do that. And I love them for it. I wish we had more."

Wilson has thought that the current environment is risky for a while now. In 2010, for instance, he warned of storm clouds. In March he wrote about how zero percent interest rates were fueling growth in the startup world.


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Two Decades After Escaping The Wars In Yugoslavia, This Woman Has Become A Successful Tech Entrepreneur

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Natalia Burina

As a child growing up in a small town in Yugoslavia, Natalia Burina didn't really understand what was going on, but she vividly remembers the sudden shift from normality to chaos.

"It just seemed like we went from having a fairly good life where we would drive to Croatia every summer, and we went from that to just like, oh, we have five suitcases of clothes and we don't know anyone, we don't speak English," Burina told Business Insider.

Burina's family had escaped the Yugoslav Wars in the early 90s and landed in the US, where they encountered an acute culture shock. Her family was fairly well-off in Yugoslavia — her dad was an anesthesiologist, her mother an engineering manager — but as a result of the war, they wound up cramming six family members in a two-bedroom apartment in a "not-so-nice part of town in Seattle."

It took some time, but Burina slowly found herself growing more comfortable with the new language and the new life. She connected with one specific teacher, who was also a refugee, having survived the Holocaust, and this teacher really helped Burina assimilate into the US.

Burina eventually wound up at the University of Washington, studying applied math with a computer science focus.

NataliaChild

"With immigrant parents, you had to be either an engineer or a doctor," Burina said.

At the beginning, Burina chose the traditional route to satisfy her parents. She worked at Microsoft, then eBay, and then Samsung. Now in Silicon Valley, Burina has found a path for herself that combines all of her passions.

"If [my parents] hadn't steered me towards [engineering] I would have probably majored in languages, because I love languages, I love literature, but I feel like I've gotten to a point in my life where I can combine all these things I like in the company I’m building now."

Along with a former classmate from the University of Washington, Burina created Parable early this summer. According to Burina, the app is meant to target "everyone who’s frustrated with all the crap posted on Facebook and the disgusting things on Secret."

In essence, the app is like Secret but for more intelligent conversation. So users post meaningful quotes or sayings or life lessons.

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Burina went into the project with some startup experience, having founded the location-based startup Flockish and later selling it to Stubhub, but for now she's just seeing where things go.

"I love the tech space, and I always see myself in the tech space," Burina said. "I never grew up thinking I would be an entrepreneur. It didn’t even occur to me that it would be a possibility, but coming to Silicon Valley I feel that you just can't escape from it. It gives you so much more control over your work to do something where you define the product, you define the daily work, so it's really fulfilling that way.

"Hopefully things work out for me with the startup but if not I will definitely be doing something with technology. It may take different flavors, so im interested in investing, different applications of technology to media and e-commerce. I’m not sure where I'll go next, but I've learned not to plan too much ahead of time and to take advantage of the opportunities I have at my disposal now."

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